7 กุมภาพันธ์ 2567 Liberty Whitehouse ArbitrationLinks

English Court takes novel approach to sovereign immunity in the registration of ICSID awards

In Border Timbers Limited and another v Republic of Zimbabwe [2024] EWHC 58 (Comm), the English Commercial Court has taken what it described as “a novel approach for which there is no direct authority” in finding that sovereign immunity does not arise in an application to register an ICSID award in the English Courts. We take a short look at the judgment.

Background

Border Timbers and Hangani (the “Claimants”) obtained an ICSID award worth approximately USD 125 million in a claim against Zimbabwe under the Switzerland-Zimbabwe investment treaty. After an ICSID annulment committee dismissed Zimbabwe’s annulment application, the Claimants successfully applied without notice to the English courts (under CPR 62.21) for registration and entry of judgment of the award under the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”), i.e. the statute implementing the ICSID Convention in English law.

Zimbabwe applied to set aside the registration order, on the grounds that it was immune from the jurisdiction of the English courts to determine the registration application by virtue of section 1(1) of the State Immunity Act 1978 (SIA 1978).

The Claimants argued in response that Zimbabwe fell within one or both of the following exceptions to adjudicative immunity set out in the SIA 1978, asserting that:

  • The provisions of the ICSID Convention, in particular, Article 54, amounted to a prior written agreement submitting to the jurisdiction of the English courts for the purposes of enforcement of any award such that section 2 SIA 1978 was satisfied; or
  • Zimbabwe had agreed to submit the underlying dispute to ICSID arbitration and so, pursuant to section 9 SIA 1978, was not immune in respect of UK court proceedings relating to that arbitration. The English court was bound by the decision of the tribunal and the annulment committee that Zimbabwe had consented to the dispute being submitted to ICSID arbitration.

The Court’s decision

Exceptions to sovereign immunity

Dias J held that the Claimants failed to establish that either of those exceptions to sovereign immunity under the SIA 1978 applied. In particular, she held that:

  • Although Article 54(1) of the ICSID Convention is a general waiver of immunity against recognition and enforcement of ICSID awards (but not execution), it was not a sufficiently clear and unequivocal submission to the jurisdiction of the English courts for the purposes of section 2 SIA. In this respect, the Judge recognised that her decision runs contrary to the recent judgment of Fraser J in Infrastructure Services Luxembourg Sarl v Spain [2023] EWHC 1226 (Comm).
  • Section 9 SIA 1978 requires the Court to make its own determination on whether a valid arbitration agreement existed and ICSID awards are no different. The Court was therefore not bound by an ICSID tribunal’s own finding that it had jurisdiction.

Whether sovereign immunity was engaged at all

Nevertheless, Dias J ultimately declined to set aside the registration order. In her view, sovereign immunity does not arise at the stage of an application to register and enter judgment on an ICSID award at all. So it was not open to Zimbabwe to have it set aside on that basis. The Judge found that:

  • The registration procedure for ICSID awards under CPR 62.21 is a different and simplified version than that for non-ICSID awards, in particular there is no express requirement for service of a claim form.
  • A state is only impleaded, and the jurisdiction of the English courts only formally invoked against it, when the order granting registration is served on the state. The question of sovereign immunity is not engaged before that point.
  • At the registration stage, the Court is performing an “essentially ministerial act” to comply with the UK’s ICSID Convention obligations.
  • The 1966 Act expressly recognises the distinction between an application for registration (of which only notice must be given) and the resulting order for registration (which must be formally served).

Once served, a state may apply to have the order set aside only on very limited grounds (such as a failure of full and frank disclosure, and not on the grounds that it should have not been made on the merits). A state, including Zimbabwe, could, however, still then claim immunity against execution in relation to any steps taken to execute the award following registration.

Whilst Dias J acknowledged that this part of her decision was “novel” and had not in fact been raised by either side, she was of the view that it:

  • Gave “full force and effect” to the UK's ICSID Convention obligations to recognise and enforce ICSID awards and recognised the self-contained nature of the ICSID regime.
  • Drew a principled distinction between applications to enforce ICSID awards, which are not served and where the award cannot be reviewed, and applications to enforce New York Convention awards.
  • Did “no violence to the principles of state immunity because an order for recognition and enforcement goes no further than recognising the award as binding”.

Comment

This judgment represents a new take on a matter that has been the subject of much legal debate across enforcement actions globally, and its ramifications remain to be seen. Dias J herself observed that the Court of Appeal may soon be considering aspects of this topic (in particular, the interrelationship between Article 54 ICSID Convention and section 2 SIA 1978) in an appeal in the Infrastructure Services case (indeed she noted that this allowed her "slightly more latitude" in reaching her conclusions); albeit that case also carries with it additional intra-EU issues. Zimbabwe has also been granted permission to appeal the decision to the Court of Appeal. Parties to ICSID award enforcement cases will no doubt be eager to see how this issue plays out in the higher courts.

Click here for a copy of the judgment.